403(b) and 457 Plan Rollover to IRA: Complete 2026 Guide

Teachers, nurses, hospital employees, government workers, and non-profit staff often have 403(b) or 457(b) plans instead of 401(k)s — and the rollover rules are meaningfully different. The most important difference: a governmental 457(b) offers penalty-free withdrawals at any age after separation, but that benefit disappears the moment you roll the money into an IRA. And a non-governmental 457(b) can't be rolled to an IRA at all.

Who has these plans

403(b) plans — also called tax-sheltered annuities (TSAs) — are available to employees of:

• Public school systems and universities (K-12 teachers, professors, administrators)
• 501(c)(3) tax-exempt organizations (non-profits, foundations, charities)
• Hospitals and health systems (nurses, physicians employed by a non-profit hospital network)
• Church organizations and religious institutions
• Cooperative hospital service organizations

457(b) plans are offered by two very different employer types, and the distinction is critical:

• Governmental 457(b): State and local government employers — cities, counties, state agencies, public schools (which often offer both a 403(b) and a 457(b) simultaneously), public hospitals, and transit authorities.
• Non-governmental 457(b): Tax-exempt private organizations under IRC § 501(c). Typically offered to a select group of highly compensated employees (executives, senior physicians) — not rank-and-file workers. Think: a private non-profit hospital offering a deferred comp plan to its employed physicians.

Many public school employees and state university employees have both a 403(b) and a governmental 457(b). This dual-plan access creates a significant tax-deferral advantage discussed below.

Part 1 — Rolling a 403(b) to an IRA

Mechanics: nearly identical to a 401(k) rollover

403(b) plans are "eligible retirement plans" under IRC § 402(c)(8)(B), which means pre-tax 403(b) balances can roll tax-free to a traditional IRA, and Roth 403(b) balances can roll tax-free to a Roth IRA. The mechanics mirror a 401(k) rollover exactly:

• Always request a direct rollover (trustee-to-trustee). If the plan cuts a check to you instead, 20% is withheld for taxes, and you have 60 days to deposit the full gross amount — including the withheld 20% from other funds — into an IRA or face a taxable distribution. See our 60-day rollover guide for the full mechanics and traps.
• Separation from service triggers rollover eligibility. You can't typically roll an active 403(b) mid-employment unless the plan offers an in-service distribution (some plans do at age 59½ or older).
• Outstanding 403(b) loans: if you have a plan loan, it generally becomes a taxable distribution upon separation unless you repay it. Some plans allow the loan to continue as a standalone "defaulted loan" — check with your plan administrator before separating.

403(b)-specific considerations not present in 401(k) plans

The 15-year service catch-up (IRC § 402(g)(7)). Employees with 15+ years of service at a qualifying organization (schools, hospitals, church, home health agencies) may be eligible to contribute an additional $3,000/year above the normal elective deferral limit, up to a lifetime total of $15,000. This is a legacy provision that operates alongside — and before — the age-50+ catch-up. If you've worked 15+ years at an educational institution or hospital and have not fully used this lifetime allowance, you may have been leaving money on the table. This doesn't affect rollover eligibility, but it affects how much basis you've built in the account.

Annuity contract complications. Older 403(b) accounts — especially those established before 2009 — may be held as individual annuity contracts rather than custodial accounts. These can have surrender charges, limited transfer options, and complex exchange rules. Before initiating a rollover, ask whether your 403(b) is held as an annuity contract and whether a surrender charge applies. If surrender charges are material (some legacy annuities have 7–10 year charge schedules), it may be worth waiting out the surrender period before rolling.

Universal availability rule. 403(b) plans must be made available to all eligible employees — unlike 457(b) non-governmental plans, which can exclude most of the workforce. If your employer offers a 403(b), you likely have access to it.

The pro-rata rule applies exactly as it does with 401(k)s

If you make backdoor Roth IRA contributions, rolling pre-tax 403(b) money into a traditional IRA creates the same pro-rata problem it would with a 401(k) rollover. Once you have pre-tax IRA balances, the IRS pro-rates your conversions — you can't just convert the non-deductible contribution tax-free. See our pro-rata rule guide for the math and three ways to neutralize the problem, including rolling IRA balances back into an employer plan.

403(b) rollover and ERISA creditor protection

Most 403(b) plans maintained by 501(c)(3) organizations are ERISA-covered, which means the anti-alienation rule (29 U.S.C. § 1056(d)) provides unlimited federal creditor protection — same as a 401(k). Government employer 403(b) plans may be exempt from ERISA but typically have equivalent state-law protection. Once rolled to an IRA, the protection drops to the $1,711,975 bankruptcy cap (as of 2025, indexed triennially) with state-specific rules outside bankruptcy. For nurses and hospital employees in high-liability roles, this tradeoff deserves attention before rolling a large balance.

Part 2 — Rolling a governmental 457(b) to an IRA

You can — but there's a trap most advisors miss

Governmental 457(b) plans are eligible retirement plans under IRC § 457(e)(16), and their balances can be rolled to a traditional IRA, Roth IRA, 401(k), 403(b), or other governmental 457(b). The mechanics are the same as a 401(k) rollover: request a direct transfer, avoid the 60-day indirect rollover if possible.

But before you roll, understand what you're giving up.

Example — the cost of a premature rollover. Lisa is a city transit authority employee who retires at 53 with $800,000 in her governmental 457(b). She plans to live on $65,000/year until Social Security at 62. If she leaves the money in the 457(b), she can take $65,000/year with no early-withdrawal penalty for 6 years — $390,000 distributed entirely penalty-free. If she rolls to an IRA first, she owes 10% extra tax on each distribution before 59½: $6,500/year, totaling $32,500 in unnecessary penalties over that same period. At her marginal rate, the combined tax cost on the early distributions is substantially higher than if she'd kept the 457(b) until 59½.

When rolling a governmental 457(b) to an IRA makes sense despite the trade-off:

• You don't anticipate needing distributions before 59½ — the penalty exemption has no value if you won't exercise it.
• Your 457(b) plan has poor investment options or high fees, and the IRA investment advantage compounds materially over time.
• You want Roth conversion access — most 457(b) plans don't allow in-plan Roth conversions.
• You want to consolidate multiple accounts into one IRA for simplified management and beneficiary planning.
• You're over 59½ — the penalty exemption is moot once you can take IRA distributions without penalty anyway.

The partial-rollover strategy. There's no rule requiring you to roll the entire 457(b). If you'll need $150,000 before age 59½ but the other $600,000 is long-term money, you could leave $150,000 in the 457(b) for penalty-free bridge income and roll only the $600,000 to an IRA for better investment access and Roth conversion flexibility. Check your plan's partial-rollover rules — most governmental plans allow this, but some require the full account balance to move.

Governmental 457(b) rollover and the still-working exception

While still employed, most governmental 457(b) plans do not allow in-service rollovers before age 70½ or 72 (plan rules vary). Once you've separated from service, you're generally free to roll at any time. Unlike 401(k) plans, 457(b) distributions don't qualify for the "still-working" RMD delay — RMDs from a 457(b) begin at the normal RMD age (73 for those born 1951–1959; 75 for those born 1960 or later, per SECURE 2.0 § 107) even if you're still employed.

Part 3 — The non-governmental 457(b): the rollover trap

Why this is — and why it matters

Non-governmental 457(b) plans are not "eligible retirement plans" under IRC § 402(c)(8)(B). They're deferred compensation arrangements that escape current taxation under IRC § 457(b) only because the money remains an unsecured asset of the employer — effectively an IOU. The tax deferral exists because the employee doesn't have constructive receipt. Once the funds are distributed, they're taxable as ordinary income. There's no mechanism to move them into an IRA without first taking a taxable distribution, which immediately creates a tax event.²

The rollover eligibility mismatch trap. This catches people who have worked at both public and private sector non-profit employers. A physician who spent 10 years at a public university hospital (governmental 457(b) — can roll to IRA) and then 10 years at a private non-profit health system (non-governmental 457(b) — cannot roll to IRA) has two very different plans with the same name. If they assume both operate the same way, they may discover the non-governmental 457(b) balance is stuck in a plan they can't roll out of until they take a distribution and pay full ordinary income tax.

What you can do with non-governmental 457(b) money:

• Leave it in the plan and take distributions per the plan's schedule (typically at separation from service or at a fixed date if elected in-plan).
• Take a lump-sum distribution, pay full ordinary income tax in that year, and invest the after-tax proceeds in a taxable brokerage account.
• Roll to another 457(b) plan of another 501(c)(3) employer — if your next employer offers one and accepts incoming rollovers. This is permitted but rare in practice.

There is one scenario that loosely resembles a "rollover": if a non-governmental 457(b) plan itself is transferred to another eligible employer's non-governmental 457(b) plan due to a corporate transaction, the IRS has accepted this in some rulings. But this is a plan-to-plan transfer, not an individual rollover — you don't control it.

Non-governmental 457(b) and the substantial risk of forfeiture

Unlike qualified plans, non-governmental 457(b) balances are technically subject to the employer's creditors if the organization goes bankrupt. The funds must remain an unsecured promise — they cannot be placed in a trust for the employee's benefit (a "rabbi trust" protects against employer's change of mind but not bankruptcy). If your private non-profit employer is financially troubled, ask hard questions about the security of your deferred comp balance before further deferring.

Part 4 — 457(f) plans: restricted deferred comp

Some non-profits offer 457(f) plans — deferred compensation without a contribution limit, typically used for key executives. The tax treatment is fundamentally different: there's no deferral until the money vests (it's taxed at vesting, when the substantial risk of forfeiture lapses). Once taxed, it can't be rolled to an IRA because there's no pre-tax balance to roll — the money has already been included in income. 457(f) plans are not rollover-eligible and require separate tax planning around vesting events.

Part 5 — The double-deferral advantage (403b + 457b)

Here's the most underutilized feature of the non-profit and public-sector retirement landscape: if your employer offers both a 403(b) and a governmental 457(b), the contribution limits are completely independent of each other.³

A 62-year-old teacher at a public school district offering both plans can defer up to $71,500 per year in 2026 ($24,500 + $11,250 to the 403(b), plus $24,500 + $11,250 to the 457(b)). That's nearly three times what a 401(k)-only employee can shelter. Even a 45-year-old maxing both plans gets $49,000 in annual pre-tax deferral vs $24,500 for a 401(k).

This double-deferral opportunity is why some public-sector employees can retire with significantly higher plan balances than private-sector peers at the same salary. When you do eventually leave, understanding which plan to roll first (and under what conditions to keep the 457(b) for pre-59½ bridge income) is a genuine planning question worth getting right.

Interactive plan eligibility checker

Answer three questions to map your specific situation to the right rollover path.

The rollover mechanics: step-by-step for 403(b) and 457(b) governmental plans

Step 1 — Choose your destination IRA

Open a traditional IRA at a low-cost custodian (Fidelity, Vanguard, Schwab) if you don't already have one. If you have Roth 403(b) or Roth 457(b) contributions, you'll want a separate Roth IRA opened. Don't mix pre-tax and Roth rollover funds into the same IRA account.

Step 2 — Request a direct rollover from your plan

Contact your plan administrator and specifically use the words "direct rollover." The check should be made payable to "Fidelity FBO [Your Name]" (or equivalent at your chosen custodian) — not to you personally. If the check is made out to you, 20% mandatory withholding applies and you'll have to cover the withheld amount from other funds to avoid a taxable distribution.

Step 3 — Handle plan loans

If you have outstanding loans from your 403(b) or 457(b), talk to your plan administrator before separating. A loan offset — where the plan reduces your balance by the loan amount and reports it as a distribution — is taxable and potentially penalty-subject. Since 2018, qualified plan loan offsets (due to plan termination or separation from service) can be rolled to an IRA within 60 days of the offset's due date (your next tax return filing deadline including extensions), giving you more time to find the cash to complete the rollover.

Step 4 — Consider the tax year timing

If you're doing a Roth conversion in the same year as your rollover, coordinate the timing. Rolling to a traditional IRA and converting in the same year is common, but adding both events to one tax year can push you into a higher bracket or past an IRMAA threshold. See our Roth conversion guide for bracket-targeting strategy.

Step 5 — Update beneficiary designations on the new IRA

Your 403(b) or 457(b) beneficiary designations do not transfer to the new IRA. Log in to your new IRA account and designate primary and contingent beneficiaries immediately. This is routinely forgotten and has led to plan assets passing to estates (bypassing probate benefits of a named beneficiary) or to ex-spouses when the account holder forgot to update after a life event.

Rollover scenarios by profession

Public school teacher with both a 403(b) and a 457(b)

Maria is a 58-year-old teacher retiring after 30 years. She has $480,000 in her 403(b) and $310,000 in her governmental 457(b). She plans to retire at 58, bridge to her pension supplement at 62, and start Social Security at 67.

For the 457(b): Maria needs approximately $50,000/year from her savings for 4 years before the pension supplement fully covers her lifestyle. She should consider keeping at least $200,000 in the 457(b) for penalty-free bridge income and rolling the remaining $110,000 to an IRA. The $480,000 403(b) can roll to an IRA without penalty trade-off concerns — she can access it at 59½ within 18 months.

Roth conversion opportunity: In her first 2–3 years of retirement, Maria's income will be low (just 457(b) distributions and possibly a small pension). With the 2026 standard deduction at $30,000 (MFJ), she can likely convert $40,000–$70,000/year of her traditional IRA to Roth at the 12% or 22% bracket before hitting IRMAA territory. A fee-only advisor can model the optimal path.

Non-profit hospital employee with a non-governmental 457(b)

Dr. Patel is a 52-year-old employed physician at a large private non-profit health system. She has $1.2M in her hospital's 403(b) and $340,000 in the hospital's 457(b) executive deferred comp plan. She's leaving for a private practice.

The 403(b): fully rollover-eligible to an IRA, same as a 401(k). She should use direct rollover and watch for any surrender charges on the annuity contracts inside the plan.

The 457(b): this is a non-governmental 457(b). She cannot roll it to an IRA. Her options are to take distributions per the plan's payment schedule (often spread over 5–15 years to smooth income recognition) or take a lump sum and pay ordinary income tax in that year. With a $340,000 balance at her marginal rate, the tax on a lump-sum distribution could exceed $130,000. A fee-only advisor experienced in deferred compensation can model distribution scheduling strategies to spread the income across lower-income retirement years.

When to involve a fee-only advisor

The 403(b)-to-IRA rollover is straightforward for most people — the mechanics are identical to a 401(k) rollover. But a fee-only advisor adds clear value in these specific situations:

• Non-governmental 457(b) distribution planning: The tax hit on a large balance requires multi-year income scheduling. This is exactly the kind of optimization that doesn't have a simple answer without a full financial picture.
• Governmental 457(b) bridge-income strategy: Deciding which portion to keep in the plan vs. roll — and in which years to take which distributions — requires modeling your full income picture including pensions, Social Security, IRMAA tiers, and Roth conversion windows.
• Dual-plan coordination: If you've been maxing both a 403(b) and a 457(b) for years, you have a complex layered account structure at rollover. The order of operations — which accounts to draw first, which to convert, which to leave for RMD minimization — is worth professional analysis.
• Pro-rata rule with large pre-tax balances: If backdoor Roth contributions are important to your strategy, you need a clear plan for the pre-tax IRA balances before they accumulate to a size where the pro-rata contamination is irreversible without a large taxable conversion.

Use the form below to connect with a fee-only advisor who specializes in IRA rollover planning for your specific situation. No commissions, no product sales — just advice.

1. IRS — IRC 457(b) Deferred Compensation Plans. Governmental vs. non-governmental 457(b) plan rules; penalty exemption for governmental plans.
2. NAPA-net — Nongovernmental 457(b) Plans and Rollovers: The Two Don't Mix (2024). Explains why non-governmental 457(b) balances are ineligible for IRA rollover.
3. PLANSPONSOR — What Are the Maximum 403(b) and 457(b) Deferral Limits for 2026? Confirms separate $24,500 limits allowing $49,000 combined deferral.
4. IRS — 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500. Authoritative 2026 contribution limits. All 2026 values in this guide are from IRS Rev. Proc. 2025-32 and IR-2025-244. Values verified April 2026.

2026 tax values verified April 2026 against IRS.gov, PLANSPONSOR, and NAPA-net. All values subject to annual IRS adjustment.